Breakenridge: Alberta has to do more than simply hoping for higher oil prices

As yet another rating agency warns against Alberta’s hope-for-the-best debt reduction strategy, it’s rather unnerving to see our finance minister reiterate that they will, essentially, continue to hope for the best.

On Friday, Alberta received news of its fifth credit downgrade in just the past two years. S&P Global Ratings announced that our province was being bumped down not one, but two notches – from AA to A+.

The agency couldn’t help but notice that Alberta’s budgetary performance “has significantly deteriorated and is materially weaker compared with that of both domestic and international peers.”

Accordingly, they forecast that Alberta’s “debt burden will continue to grow rapidly.” Of course, we shouldn’t be surprised by that, since the NDP expects to be running considerable deficits for the foreseeable future.

S&P Global’s report also observes that “the government is partly looking to a recovery in oil prices to improve its fiscal position.” That’s rather charitable, since what they choose to call “partly looking to” is probably much closer to “desperately praying for.”

The same government that vowed to get us off the roller-coaster of energy price swings has crafted a budgetary strategy that is reliant on that roller-coaster charging upward once again. Unfortunately, though, this fingers-crossed approach is hampered further by the government’s overly optimistic oil prices forecasts.

So now on top of all the debt we’re accumulating — $94 billion by the end of the 2020 fiscal year, according to S&P Global – we’re now faced with the very real likelihood of increased borrowing costs.

For Finance Minister Joe Ceci, however, it was a case of, “Move along, folks. Nothing to see here.”

The minister took to Twitter to repeat a familiar NDP talking point: “We will not raise taxes or make reckless cuts.”

Which is to say, “We will continue on the path we’re on.” That tweet steered people to the government’s equally disconnected news release.

“I believe this rating change overlooks many of the positive things happening in our province right now,” the minister declared, adding that, “Only a week ago, Moody’s affirmed its existing credit rating for the province.”

Moody’s, you say? Interesting that the minister would point people in the direction of last week’s Moody’s statement, since it warns that “Alberta’s rapidly rising debt burden, protracted deficits and above-inflation expense growth continue to put significant pressure on its rating.”

Furthermore, Moody’s notes that the government’s string of massive deficits will “contribute to a rising debt burden that may approach 150% of revenues by 2019-20.”

That’s the report they wish to brag about? Hardly a ringing endorsement of the government’s strategy, it would appear.

Ceci’s observation about “positive things” happening in Alberta is a non-sequitur, too. Indeed, the S&P Global report makes a point of noting Alberta’s “strong fundamentals” and “high levels of GDP.” And in fact, just yesterday, the Conference Board of Canada announced it expects Alberta’s economy to grow by 3.3 per cent this year.

However, all of that merely underscores the fact that the NDP is making a very deliberate choice to have its cake and eat it, too. These massive deficits are not unavoidable, despite the fact that the government would have us believe that they are. Reining in spending need not be “reckless,” either.

S&P Global points out that Alberta has “good budgetary flexibility” and “strong tax advantages,” and yet the government refuses to “use these in a significant way to improve its fiscal position.”

It does require tough choices. Next door in Saskatchewan, the government is making tough choices on both the revenue and spending sides to try and get that province off the energy roller-coaster. One can certainly disagree with their approach, but the mocking from the Alberta NDP is rather disingenuous.

We need to get serious. If the NDP aren’t prepared to do so, then the other parties need step up with some credible plans – ideally ones that don’t rely on hoping for the best.

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